Private landlords need a better deal from Universal Credit

Tenants and landlords rightly want to ensure that rents are paid in full and on time. Universal Credit is failing to provide this, and preventing rent arrears must be crucial to determining the success of this flagship Government programme.

Research by the Residential Landlords Association (RLA) last year found that 25 per cent of landlords with tenants in receipt of Universal Credit said that they had tenants in rent arrears. This supports the recent admission by Lord Freud, the former Welfare Reform Minister, to the Work and Pensions Select Committee when he said that “there is an arrears issue.”

The result of landlords not having confidence that they will receive the rent is that fewer will be willing to rent property to those in receipt of benefits. They can’t afford to take the risk of being out of pocket.

This is already happening: According to one survey, 68 per cent of private sector landlords say that they are less likely to rent to tenants on benefits

What has brought about this crisis of confidence and growing arrears problem is that under Universal Credit, unlike housing benefit, the opportunities for direct payment to the landlord are much reduced.

It’s also paid monthly in arrears, with the first payments not being made until six weeks after the claim has been made.

Ministers argue that insisting that Universal Credit is paid directly to the tenant promotes financial responsibility, but for some tenants who are fearful of going into rent arrears, the responsible thing to do would be to opt to have payments made directly to the landlord.

It cannot be right that Ministers and officials in Whitehall feel that they are best placed to determine what is the financially responsible course of action for every tenant in receipt of Universal Credit.

For Universal Credit claimants who own a property and who are having trouble paying their mortgage, the Government will provide support to pay mortgage interest directly to the lender.

Why is it that those who are in rental accommodation are denied the same support concerning the payment of their rent to their landlord?

It is time to trust claimants to know what is best for them, and give tenants in receipt of Universal Credit the opportunity to choose, where they feel it is best, to have the housing element paid directly to their landlord.

Ministers would further argue that the system, as currently constituted, allows for payments of rent to be made to the landlord where a Universal Credit claimant is in two months of rent arrears or more.

However, by the time landlords makes a request for such arrangements to be put in place, and whilst the payments are processed, arrears continue to mount up. How can this be financially responsible for the tenant or give confidence to landlords?

Where landlords have sought for such payments to be made directly to them because of rent arrears, 61 per cent found the processes to be either “tricky” or “very difficult”. The same proportion found that the Department for Work and Pensions was not very helpful in dealing with their concerns or queries.

The problem is compounded by the lack of any proper system to ensure that where a tenant in receipt of Universal Credit builds rent arrears and then moves to another property, the landlord can reclaim the debt which is owed.

When this issue was raised during debate on the Bill bringing in Universal Credit Lord Freud, then the minister responsible, dismissed concerns by saying that: “it is not unrealistic to suppose that commercial landlords, like any other small business people, should make a certain amount of provision for bad debt.”

With local authorities and other agencies increasingly looking to the private rental market to house more vulnerable people, dismissing concerns about rent arrears with a simple shrug of the shoulders undermines landlords’ confidence to offer places to those in need, and create major problems for potential tenants and local authorities.

How can it promote financial responsibility to enable a Universal Credit claimant simply to leave rent arrears unpaid?

The Government needs to treat private and social sector landlords more equitably.

Under what is known as ‘Trusted Partner Status’, social landlords are able to access much greater information on tenants in receipt of Universal Credit, such as when they are paid and how much.

It enables them to more swiftly and automatically put in place measures to ensure payments are made directly to the landlord where rent arrears begin to develop.

This is a process that is not available to landlords in the private sector, making it more difficult for them to work with tenants who might be at risk of rent arrears.

Given the importance of preventing such arrears, the government should work with the sector to develop a system whereby private landlords have the same access to information as the social sector.

It is time that ministers applied sound Conservative beliefs in choice and individual responsibility and let tenants decide for themselves what is in their financial best interest. In doing so they’ll give landlords the confidence to supply the housing needed for benefits claimants.

This article first appeared in Conservative Home, published on Saturday, March 25th. To read it on the site click here.

About the author

Alan Ward

Alan is the Chairman of the RLA. He has been a landlord and property developer in the PRS since 1993, became a founding director in 1998, and has been the RLA chairman since 2008.

He believes the PRS provides an essential service to the nation with little recognition for its economic contribution. He says regulation is pointless without effective enforcement, and that requires an intelligence-lead approach to target the criminals.

He has faith in the well-meaning majority of landlords to self-regulate. He despises the criminals and frauds who disproportionately concentrate the minds of those in Westminster and town halls.

2 Comments

I have taken on two families, with new born babies (they were known to me) who are both on benefits.
They both work part time as well, or will being when the baby is a few months old. One has been in two months, the other six weeks. Neither has received any benefits yet. If I had not given them property they would be sofa surfing or in temporary accommodation. I saw the accommodation one was being offered, I would not have housed a dog in there let alone a nine month pregnant lady.
Both have asked for the housing part of their benefit to be paid direct to me their landlord, both were refused and told to wait until they were at least two months two days overdue.
We are a family company and can afford to help these people out, they also have support from their parents. Once the benefits are sorted they will be fantastic Tenants.
I will not do it again as our council did nothing but lie to both sides.
How many of these family’s are going to be on the street, on in accommodation that does not meet their needs before the government wakes up to what is happening, and Landlords all become hardened towards all people on benefits.

About Author

Alan Ward

Alan is the Chairman of the RLA. He has been a landlord and property developer in the PRS since 1993, became a founding director in 1998, and has been the RLA chairman since 2008.

He believes the PRS provides an essential service to the nation with little recognition for its economic contribution. He says regulation is pointless without effective enforcement, and that requires an intelligence-lead approach to target the criminals.

He has faith in the well-meaning majority of landlords to self-regulate. He despises the criminals and frauds who disproportionately concentrate the minds of those in Westminster and town halls.